Navigant Research Blog

How Invested Is NY REV in a DER-Centric Energy Future?

Lauren Callaway — November 10, 2016

Last week, the New York Department of Public Service (DPS) released a report examining the best means of future integration for distributed energy resources (DER). Spoiler alert: it’s not net energy metering.

Instead, under the Reforming the Energy Vision (REV) proceeding, state policymakers want to see the development of a valuation framework for DER that values resources according to benefits that can be achieved by both the utility and customers. This should be done by establishing the holistic value of DER on the grid in the short term and by enabling the configuration of transactive, distributed markets for DER in the longer term. In the short term, proposed value for DER will be focused on two areas:

Distribution grid services, which include offsets and deferment of short-term and long-term investment costs.

Aggregated generation resources and ancillary services to be sold to the New York Independent System Operator (NYISO) through NYISO markets to optimize generation and transmission operations and costs.

The DPS report stated: “The modernization of New York’s electric system will involve a variety of products and services that will be developed and transacted through market initiatives. Products, rules, and entrants will develop in the market over time, and markets will value the attributes and capabilities of all types of technologies. As Distributed System Platform capabilities evolve, procurement of DER attributes will develop as well, from a near-term approach based on requests for proposals and load modifying tariffs, toward a more sophisticated auction approach.”

Though the recommendation does not completely get rid of retail net metering (which it proposes to grandfather in), this is a significant stepping stone in terms of providing a roadmap toward the active restructuring of an energy market around DER integration.

Initiatives at Odds?

Prior to the report, REV introduced two other efforts related to the accurate valuation of DER. The first, the 2015 Benefit Cost Analysis framework, sought to establish a precise structure for evaluating and comparing different types of investment required to establish a distribution-level market for DER (including both distribution infrastructure and grid-connected DER). A corresponding DPS effort includes a proposal to create utility Distribution System Implementation Plans, which “identify [utility] system needs, proposed projects for meeting those needs, potential capital budgets, particular needs that could be met through DER or other alternatives, and plans for soliciting those alternatives in the marketplace.”

But these tasks and initiatives seem to run counter to what the state is actually enabling utilities to invest in. As of now, the only major investment projects in New York seem to be for advanced metering infrastructure (or smart meter) deployments. On the other hand, REV demonstration projects have been single use cases and limited in scope. To take on the task of granular, accurate valuation—one of the most complex technology challenges associated with DER integration—might require a bit more upfront and direct investment.